Maybank GM Daily - 27 Mar 2014

FX

Global

·         Risk appetite beat a retreat overnight in New York as technological shares came under selling pressure. This was despite a stronger durable goods order for Feb which rose 2.2%m/m, an improvement from the previous decline of -1.3%. DJI was down -0.6%, accompanied by S&P at -0.7%. NASDAQ was the laggard at -1.4%.

·         Earlier in Hong Kong, RBA Glenn Stevens gave a promising speech on the Australian economy on Wed. He sees signs of a handover from the mining sectors to the non-mining sectors and boom in residential construction. That said, he expects commodity prices in the future to be softer than the recent past. Terms of trade will continue to fall further. AUD soared right after, leading all the AUD crosses higher.

·         In the session ahead, US is releasing the final estimate of its 4Q GDP, along with the usual weekly initial claims.

·         There are a few Fed speaks line up today. Fed St. Louis President James Bullard speaks on the US monetary policy in HK at the moment. Later in New York session, Fed Cleveland President Sandra Pianalto will speak in Ohio.

·         The dip in risk sentiments softened the dollar. USD/AXJs are likely to remain mixed today. Initial strength of the regional currencies is attributable to the overnight dollar slide but caution is likely to keep pairings supported on dips given ongoing concerns over China as well as geopolitical risks in Russia and protests in Thailand and Taiwan. BSP makes monetary policy decision today. Our economist expects any tightening to be minimal.

G7 Currencies

·         DXY – Shallow Dips. The index softened from European session highs to around 79.970 as we write in early Asia morning. While MACD is still tilting lower, the MACD forest shows milder bearish pressure. Whike risks are still to the downside, we think that the 79.920-support could slow offers. Dips around this level should be shallow.

·         USD/JPY – Congestion still.  Pair broke the 102.10-support and pair is now testing the next support level at 101.89. Intra-day chart shows increasing bearish momentum and risks are still to the downside as the financial year draws to a close. Upticks now slowed by 102.28 while a break of the 101.89-support brings the bears to the next target at 101.56.

·         AUD/USD – Taking a Breather. Bulls took a breather in overnight trade, softening from a high of 0.9247 to around 0.9220. MACD forest shows paring bullish momentum. Bulls may continue to take a breather today with upticks now guarded by recent high of 0.9247 and floor now seen at 0.9183.

·         EUR/USD – Downside risks. The pair retreated overnight, tested the 1.3774-support before bouncing off to around 1.3780. There are still risks to the downside with the next support seen at 1.3748. MACD forest has pared bullish momentum completely. A move below the 1.3748-support will put bears on a firmer foothold. Failing which could leave the pair in range-trade.

Regional FX

·         The SGD NEER trades 0.05% above the implied mid-point of 1.2665 with the top end estimated at 1.2412 and the floor at 1.2918.   USD/SGD – downside risks.  The USD/SGD is edging lower this morning on the back of dollar weakness, taking out our support at 1.2670. Last sighted around 1.2657, risks are now tilted to the downside. 1.2687 acts as barrier today, while 1.2647 should support.

·         Singapore’s industrial production came in at 12.8% y/y in Feb (Jan: 4.4% revised), in line with market expectations of 12.9%. A low base of comparison as the Lunar New Year celebrations fell in Feb last year helped. Electronics, petrochemicals and pharmaceutical output rose 14.8%, 19.7% and 20.2% y/y.

·         AUD/SGD – Retracing.  After hitting a high not seen since 20 Nov 2013 at 1.1716, the cross eased to close at 1.1697. This retracement is continuing this morning with the cross currently sliding lower at 1.1677. With risks still on the upside, we look for the cross to remain elevated above 1.1600 today. 1.1716 should cap upside today while 1.1643/1.608 should be supportive.  SGD/MYR – Rangy.  The cross continues to trade range-bound even as the cross pushes higher this morning. Currently hovering around 2.6047, momentum indicators are showing little directional clarity today. The cross should continue to trade range-bound between 2.6000/2.6078 today.

·         USD/MYR – Drifting Lower. Pair slipped from an earlier high of 3.3006 to 3.2960, last sighted. Offers are met with buying interest however. 3.2901 is still a support-level for downticks. Momentum indicators show slight bearish bias. 1-month NDF also indicate strong bearish momentum, last seen at 3.2990.

·         USD/CNY was fixed higher at 6.1465 (+0.0025), vs. previous 6.1440 (+2.0% upper band limit: 6.2719; -2.0% lower band limit: 6.0260). CNY/MYR was fixed at 0.5337 (-0.0010).

·         USD/CNY – Upside Risks. Spot bounced higher on the firmer fixing and was last seen around 6.2140. Pair has tested 6.2150-barrier before a tentative retreat. A test of this barrier exposes the next at 6.2340. Risks are to the upside. Next supports seen around 6.1990/6.1902.

·         1-Year CNY NDFs – Paring bearishness. The 1Y NDF was on the upward drift to 6.2115 at last sight, in tandem with onshore spot. Intra-day chart suggests increasing bullish pressure. Upside to meet first barrier at 6.2178 (40-SMA). Support lies nearby at 6.2063.

·         USD/CNH – Upside Risks. Pair is back above the 6.20-figure, last seen at 6.2080. MACD and RSI also points north. Next barrier is seen at the recent high of 6.2127 before the next at 6.2200. Downticks to be slowed by 6.1995.

·         USD/IDR – Upside risks. The USD/IDR is inching higher this morning, last sighted at 11448. Bullish momentum is building up with the pair in overbought territory. Foreign buying has also come off with only a net USD9.5mn in equities purchases yesterday and a net USD0.7tn in bonds sold. We continue to look for a break of resistance at 11475 for bulls take control while 11340 continues to deter downside nearby ahead of the next at 11275. The 1-month NDF is on the slide this morning, hovering around 11470 from yesterday’s close of 11490 with risks tilted to the upside still. The JISDOR was fixed higher above the 11400-level at 11408 yesterday from 11357 on Tue.

·         USD/PHP – Downside risks.  The USD/PHP continues to edge lower with the pair sighted at 44.940 this morning ahead of the BSP monetary policy meeting later today. Market appears to be pricing in a rate hike even though consensus is expecting status quo. Foreign funds bought a net USD9.3mn in equities yesterday, could continue today as the PSEi is up this morning, helping to support the PHP. With risks still to the downside, we expect 44.916 to deter downsides before 44.840 while 45.154 continues to cap. After closing at 44.97 yesterday, the 1-month NDF is edging higher this morning at 44.990 though risks are still to the downside.  Philippines’ central bank meets later today to decide on monetary policy. Despite comments to the contrary by central bank officials, market expects the BSP to hold the overnight borrowing rate steady at 3.50%.

·         USD/THB – still wobbly. The USD/THB is again wobbling this morning, hovering around 32.549. Momentum could swing either way today but the pair remained supported given the political uncertainty and possibility of further political protests. Yesterday, Thai assets found favor with foreign funds, who bought a net THB74.5mn and THB2.3bn of equities and bonds. Immediate resistance remains at 32.605 with a break exposing the stronger hurdle around 32.666, while 32.500 nearby continues to be supportive before 32.455.  Thailand’s custom exports rebounded by 2.43% y/y in Feb after falling 1.98% in Jan, coming in better than market (and our) expectations of 0.2% (1.0%). This was on the back of a jump in rice exports by 17.4% y/y from -6.8% in Jan. Imports fell 16.62% y/y in Feb on the back of weakening domestic demand, resulting in a trade surplus of USD1.8bn in Jan vs. a deficit of USD2.5bn in Feb.

Rates

Malaysia

·         Local government bond yields ended mixed in the absence of market moving factors. BNM announced a new 7.5-year benchmark MGS with an issue size of MYR4b which is within expectations. WI was given at 4.00% by foreign names however good buying interest was seen at 4.00%. At market close, the old 7-year benchmark MGS inched up by 6bp to 3.99% while the 15-yr benchmark MGS eased by 1bp to 4.49%.

·         IRS ended 1-3bps higher today and 3M KLIBOR closed 1bp higher at 3.33%. 2-year dealt at 3.57% and 3.58%, while 5-year dealt at 3.94% and 3.95% in good amounts. This is a much delayed response after offshore has traded to as high as 4.11%. We understand some small funds are taking advantage by receiving offshore/paying onshore. The coming 7.5-year MGS benchmark auction shouldn't have much of an impact on rates since market believes it would be well absorbed if yields are anywhere above 4%. We recommend squaring paid positions around here and put on received positions closer to 4%.

·         The PDS market remains soft with trades in the market mostly are asset reallocation from end clients. Pelabuhan Tanjung Pelepas 2020 was taken at 4.27% and 4.26%, lower than its previous last done at 4.30%. AA3-rated Gamuda 2018 and UEM 2018 dealt through at 4.56% and 4.60% respectively.

Indonesia

·         DMO conducted sukuk bond issuance namely SDHI 2029 A series amounting Rp1 tn with 15yr tenor paying fixed coupon of 8.43% per year. The issuance was conducted through private placement and is a non tradable bond. SDHI 2029 A will mature by March 25^th, 2029. Till the date of this report, Indonesia government have receive financing amounting Rp22,4 tn through private placement.

·         Debt Management Directorate General (DMO) to hold debt switch auction today. Government bond that are set as source bond are FR0051, FR0026, FR0027, FR0030, FR0055, FR0060, FR0028, FR0066, FR0032, FR0038, FR0048 and FR0036.

·         Indonesia bond market continue its decline yesterday as investors stays calm and watch closely on upcoming CPI and trade balance data. 10-yr, 15-yr and 20-yr benchmark series yield continue shifting up to 8.234% (5.1bps), 8.534% (1.9bps) and 8.691% (1.8bps) while 2-yr yield shifted down to 7.287% (5.8bps). Trading volume at secondary market was seen rather thin amounting Rp6,158 bn (vs average per day trading volume of Rp7,602 bn). FR0069 (5-yr benchmark series) and FR0070 (10-yr benchmark series) was the most tradable bond during the day. FR0069 total trading volume amounting Rp1,991 bn with 26x transaction frequency and closed at 100.489 yielding 7.750% while FR0070 total trading volume amounting Rp1,131 bn with 45x transaction frequency and closed at 100.942 yielding 8.234%.

·         On the corporate bond segment, trading volume was seen thin as well with total trading volume amounting Rp330 bn (vs average per day trading volume of Rp750 bn). ASDF02ACN2 (Shelf registration II Astra Sedaya Finance Phase II Year 2013; A serial bond; Maturity date: 6 Dec 14; Rating: idAA+) was the top actively traded corporate bond yesterday with total trading volume amounting Rp100 bn and was last traded at par yielding 8.7418%.

Rgds,

Maybank FX Research

Global Markets

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